What Benefits Do Smaller Agencies Offer Brands?

Two-thirds of enterprise companies expect to use a small or medium-sized agency in the next year instead of their Agency of Record (AOR) for marketing projects, per recent research from Globality conducted by the Economist Intelligence Unit. A new study [pdf] from Globality – this time in partnership with the CMO Club, looks at why that may be the case.

Roughly half of the 106 CMOs of B2C and B2B companies surveyed reported using an AOR model – either a single AOR or one plus some independent agencies. The use of multiple, independent agencies is less widespread, with 1 in 4 indicating it to be their model.

Yet there seems to be only tempered satisfaction with this overall mix: 55% reported being just “moderately” satisfied with their agency model, while close to one-third are dissatisfied.

Among those dissatisfied with the AOR model, lack of innovation and creativity was the leading reason for their dissatisfaction.

That may be leading them to turn to small or mid-size agencies: almost 4 in 10 believe that these smaller agencies offer more creativity.

But there are other benefits of using smaller agencies that are even more influential:

A leading 44% point to better personalized service;

A similar 4 in 10 would use or would like to use such an agency for more specialized knowledge; and

Some 38% believe they would derive increased value from doing so.

Educating Agencies Isn’t Easy

The report makes the case that as big agency dominance recedes (perhaps more precipitously with Martin Sorrell’s recent departure from WPP), CMOs are seeing AORs as “less agile and less adept at handling the demands of generating quality content for day-to-day social and digital platforms in an efficient and cost-effective way.” (Note the cost-effectiveness portion of that, which is a key complaint with the use of external agencies.)

But while CMOs may envision a shift to smaller agencies, it won’t come without challenges. Indeed, investing in educating new agencies is a significant concern, per the report: fully 53% of respondents named it one of their 2 biggest challenges (from a list of 7) with changing agencies.

Aside from the time investment involved in finding and vetting new agencies, other challenges with switching include having the resources to manage multiple agencies, and running current programs amidst such a change.

As such, in order to optimize their agency ecosystems, many CMOs are implementing internal training to help marketing, while others are developing better metrics with which to compare agency effectiveness.

The report recommends 4 components of a modern ecosystem that clients should pay attention to: